Redux

[pyriel]

I went to Naval Hospital this afternoon to get my son's medication and I ended up conversing with one of the people that works there. He is about to retire in two years and he said that he took the redux, 30k - tax = 22k. He said that when he retires in two year (20 years in service) he will only be receiving 40% of his base pay instead of 50%. He said that his base pay now is 3k and 40% will be$1200 instead of $1500.
I left the pharmacy shaking my head. The individual is about in early 40 and he said that he plans on using the redux money for investment. However, when I asked what kind of investment he would like to pursue, he said that he is still thinking about it.
Now lets do the math here. He received 22k after taxes for his redux. He will retire in two years. He will lose out $300 per month or $3600 per year. He will be ahead of the game for 6 years and two months ($3600 x 6 years and 2 months = $22,100). However, on the 6th year and 3rd month and all the months after, he will lose out. I guess the man didn't do his homework before deciding to take the redux.
Now, please don't get me wrong here. It is easy to turn 22k into an investment and receive more than $300 a month in passive income. My point in writing this is to educate people in making sure that they have a good plan before taking the redux. If they don't plan ahead, they will lose out in the end.
Happy investing....
Pyriel

 

[Gilligan]

........ If they don't plan ahead, they will lose out in the end.
Happy investing....
Pyriel

Failing to plan is planning to fail!

 

[Ghageman]

There have been exhaustive studies completed by the Center for Naval Analysis (http://www.cna.org/ Search "redux") demonstrating the very UNrealistic scenarios which would lead one to choose CSB/REDUX over High-3 Average. That's assuming you are planning on using the CSB for investment/retirement purposes. If you plan to spend the money to purchase something such as a house, vacation, or car, the sacrifice in total compensation over your lifetime is enormous. It can easily total well over $200k.

The CNA website has calculators and examples which make it very apparent that one should take advantage of FY2000 National Defense Authorization Act which allows individuals formerly under REDUX to choose between the High-3 and CSB/REDUX systems.

I just faced this decision and it took me about 30 minutes of research to decide to decline CSB and take the High 3.

Just my 2 cents...

r,
Ghageman

 

[pyriel]

Ghageman,
I hear you and you hit it right on target. With the scenario I gave, I don't think I would want to give up $300 a month just so I can get a 22k now, especially if I only have 2 years to retire. I'd rather get $300 per month for the rest of my life rather than to gamble that in some sort of investment.
Pyriel